CVS slashes generic drug costs, escalates price war
Using the products as loss leaders, the drugstore giant will sell 90-day supplies of more than 400 medications for $9.99 and offer discounts for cash-paying patients at its in-store medical clinics.
By Lisa Girion and Andrea Chang
October 31, 2008

One of the nation's largest drugstore chains ratcheted up a price war Thursday, offering deep discounts on generic prescriptions amid national concern about the spiraling cost of healthcare.

Drugstore giant CVS Caremark Corp. announced it would sell 90-day supplies of more than 400 medications for $9.99 and offer discounts for cash-paying patients at its in-store medical clinics.

The price war was unleashed by Wal-Mart Stores Inc., the country's largest retailer, a few years ago. Since then, many grocery stores have followed suit.

The price competition makes generic drugs just about the only healthcare bill that isn't escalating. The lower prices provide a measure of relief to consumers who are struggling with rising health insurance premiums and other out-of-pocket expenses or have lost coverage altogether.

Now savvy shoppers can buy many prescriptions for less than laundry detergent, face cream or a pound of deli meat.

Retailers can't make much, if any, profit off the cut-rate generics. But that doesn't mean they won't make money off the customers. The stores are using generic prescriptions as loss leaders to bring people in. And cheap drugs do drive other purchases.

"They are pulling us into the store," said Stephanie Nelson, an Atlanta resident who shares shopping tips on her website Couponmom.com.

"As soon as you go to the back of the CVS to pick up your prescription or wait for it to be filled, what are you going to do? You are going to shop," she said. "I'll get my diet Coke, shampoo, whatever I need. I'm not going to a different store."

Nearly every pharmacy -- from the small corner drugstore to the industry giants -- has been affected by the price war in much the same way that sales of everything from T-shirts to CDs have been transformed by Wal-Mart's low-price model.

Gone are the easy-money days when drugstores could sell a month's supply of a generic prescription for $8 and pocket the markup of 50% or more.

"Generics used to generate a significant amount of profit, and that's all been changed by Wal-Mart," said Joel W. Hay, an associate professor of pharmaceutical economics at USC. "That's really squeezed the rest of the retail pharmacy industry. And now they are getting the price down to where there is no profit left, or very little."

Still, competition for the prescription traffic is fierce. Millions of aging Americans are being treated for high blood pressure or cholesterol, allergies and other chronic conditions that send them in for refills.

Drugstores and groceries are fighting to tap the wallets of these reliable repeat customers. On top of price cuts, many big retailers are trying to steal one another's customers with coupons paying as much as $30 for each prescription transferred from another pharmacy.

CVS takes the idea one step further with its Rx Health Savings Pass program by tying prescription savings to its in-store medical services. The program, which begins Nov. 9, is aimed at the uninsured but open to anyone.

In order to get the $9.99 generic deal, customers must enroll in the program by paying an annual fee of $10. Members paying cash can save 10% on visits to the retailer's in-store MinuteClinics.

The $9.99 CVS offer is just a penny less than Wal-Mart's $10 charge for a 90-day supply.

CVS operates 554 such clinics, including 59 in Southern California, where patients can get quick and inexpensive treatment for common and minor medical problems, such as ear infections and sore throats. CVS operates more than 6,000 stores across the country, including 377 in California.

CVS said it was the right time for discounts on healthcare.

"We're in the middle of a difficult economic crisis, to say the least," CVS Chairman Tom Ryan told analysts Thursday. "People are struggling with healthcare costs, especially the under- and uninsured."

Nestor Perez, who is jobless and lives on a fixed income in Los Angeles, said he was anxious for the program to begin and figured that the generic pain reliever he takes would cost less for a 90-day supply than he currently pays for a month's worth.

"That'll be even better for me," Perez, 32, said while filling a prescription at a CVS near Echo Park on Thursday.

The deal is a "no-brainer" in the estimation of Los Angeles city planner Daryll Mackey. He figures he will save $5 over three months on the generic blood-pressure medication he takes.

"Who wants to spend money when they don't have to?" Mackey, 53, said while picking up a prescription at a CVS in downtown L.A. on Thursday. "I'm all about saving money."

Robert McNeill, a lawyer who lives in Pasadena, was less impressed, saying he prefers to stay with the brand-name prescriptions he spends $300 a month to get.

"Tell them to lower it on brand-name drugs, the stuff that people spend their money on," he said at the CVS near Echo Park.

Insurers and employers are pushing generic substitutes to save costs. And the economic downturn has changed the minds of many consumers who once preferred brand-name drugs at any price, said Greg Collins, a CVS pharmacy supervisor who oversees stores in the Inland Empire.

"We have actually seen patients who were adamant before these financial conditions started who wanted brand no matter what -- quite a few -- who say, 'I'd like to give generics a try,' " Collins said. "In the last few months, there's been significant financial pressures, and they are more likely to say, 'You know, I want to try that and see how it works.' "

The generic deals will help thrifty consumers, but they aren't a panacea, healthcare experts say. Many drugs are available only in expensive, patented formulations, and even where generic substitutes are available, they don't work for everybody.

"It's good news," said Anthony Wright, executive director of HealthAccess California. "But the thing that kills a budget is the brand-name drugs that are on patents that are significantly more. The issue that we're still very much focused on is why are some of these drugs so expensive?"

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Enrollment into the CVS/pharmacy Health Savings Pass is easy and costs only $10 annually, per person. Whether you have limited prescription insurance or no coverage at all, you can sign up today for the CVS/pharmacy Health Savings Pass and start saving immediately.

It’s not an insurance plan, but a prescription savings pass that allows you to save on the medications you and your family need. Plus, you’ll receive 10% off MinuteClinic services* inside select CVS/pharmacy stores.

Here’s how you can save with your Health Savings Pass:

• Pay only $9.99 for a 90-day supply of over 400 generic prescriptions. View complete list.
• 10% off at MinuteClinic on any regular priced health service or screening*
• Save at one of our more than 6,300 CVS/pharmacy locations nationwide.

It's like pulling teeth to get CVS to match the $4 RX prices that WAGS and Giant Eagle offer around here. Most won't do it, so I doubt they'll be participating in this, and besides, I'm not going to pay them $10 a year for the privelage of getting a 3 month supply of meds that I can get for the same price at WalMart and GE without paying a fee.

But this article does give me hope that CVS is realizing they have to get with the program. Thanks OP and repped.

Just an aside - I like the refills better - as opposed to the three month supply - because then I get to transfer the RXs around, and make money on every transfer.

i'm guessing they are doing this because of walgreens. that's the one with $4 prescriptions?

Not really, Walgreens came up with a crappy version of cheap generics program earlier this year:
"Over 400 generics priced at $12 for a 90-day supply -that's less than $1 a week! "

PROVIDED that you join their ripoff Prescription Savings Club [Enrollment for an individual is $20 per year or $35 for an entire family. Family enrollment includes spouse, dependents under the age of 23 and pets. Additional adult family members living in the same household, such as a parent or grandparent, will be issued their own card at the individual rate.].

Neither Walmart, Target or the dozens of supermarket pharmacies with generics programs require any additional fees to get generics drugs for $4 or less.

Not sure where to post this & when i search it brings up batteries - so here goes -

CVS Pharmacy

This is for CVS only!!!!!
AAA members receive a discount on prescription drugs not covered by insurance (does not apply to co-pays). Save 12% on brand prescriptions and 35% on generic prescriptions. Call 1.800.777.1023 for program details or nearest participating locations.

It's like pulling teeth to get CVS to match the $4 RX prices that WAGS and Giant Eagle offer around here. Most won't do it, so I doubt they'll be participating in this, and besides, I'm not going to pay them $10 a year for the privelage of getting a 3 month supply of meds that I can get for the same price at WalMart and GE without paying a fee.

But this article does give me hope that CVS is realizing they have to get with the program. Thanks OP and repped.

Just an aside - I like the refills better - as opposed to the three month supply - because then I get to transfer the RXs around, and make money on every transfer.

I'm in the Houston area so lots of competition. THey will gladly match prices on meds but they won't let you use a Rx coupon on top of it.

Saving $$$ is pretty slick but saving lives is the slickest deal of all! http://www.AULAction.org
Nor shall you stand by idly when your neighbor's life is at stake-Leviticus 19:16
Truly, I say to you, as you did it not to one of the least of these, you did it not to me-Matthew 25:45

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